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Problem Assessment Question


In 1973, Peter Diplock and his parents lived in a large house at Burwood. Peter was a businessman and real estate agent. Peter’s father Marmaduke died in 1974. Mary commenced living with Peter with his mother Elsie from then. Elsie died in 1980. Peter and Mary continued to lived together until recently when they separated.

Peter’s mother and father owned two residential units at Randwick in which they had tenants.  The income served to fund their retirement.  From 1980 Peter inherited those two units. Peter saved the money he received from this income source and thought of it as his personal savings. 

Peter was also in a partnership with four others in a business which made porcelain wares. This partnership was established in 1984. For years it was quite successful. Peter acquired four residential units in the late 1980s and early 1990s. He acquired each unit in the name of the partnership and used partnership money from the business to pay for each unit. The other partners knew about this but did not raise any issues with it.  They just enjoyed the successful partnership and the shared profits.  An issue has arisen now because one partner has recently died and the others are suggesting a dissolution.  The business has not been growing for years due to the new types of plastic which are popular. The dissolution of the partnership is being suggested by the surviving partners and the matter of division of assets and funds of the partnership is an issue. 

Peter and Mary have three children, John, Jack and Jane. Peter is the trustee of the R. Diplock Family Trust. This trust was established under the will of their late grandfather Roderick Diplock to provide for the deceased’s widow and children. The trust has assets over $12 million in various investments which comprise property trusts. Under the terms of the will, the trustee is forbidden from investing or using the capital and accumulated interest in anything other than investing in government bonds.

Peter is dissatisfied with the powers given to himself as trustee. He feels that bigger profits can be made from a more diverse range of investments. In the last several years, Peter explored several opportunities.

The first opportunity was a property development to construct an independent cinema in Leura in the Blue Mountains. Peter takes $1 million of trust property and purchases shares in Valerian Pty Ltd, a company owning and undertaking the development. The development is a huge success, and the value of these shares increases to an amount of $4 million as well as paying a dividend of $400,000 over two years. Peter repays the $800,000 to the trust and retains the investment and income.

The second opportunity involved investment in a supermarket at Broken Hill. In this case, Peter invested $3.5 million in this development. Unfortunately, the development failed, and the entire investment is lost.

The third opportunity involved investing in the acquisition of townhouses in Wollongong. Peter acquired five of these townhouses at a total value of $2.5 million. The townhouses were worth $500,000 each at the time of their acquisition. Peter uses $1.5 million of trust funds and adds $1 million of his own funds. Two of the townhouses were acquired in Peter’s name and he leases these townhouses for a rental income of $500 per week on a two-year lease. Over this period, each unit increases in value from $500,000 to $700,000. The remaining three townhouses are placed in the names of Peter’s children, John, Jack and Jane, for taxation purposes. None of the children gave any consideration for the acquisition of the units.

Each of the other townhouses is also leased for two years at $500 per week. Peter has expended $10,000 over two years in costs to maintain the townhouses. After a dispute with his father, Jack sells the townhouse in his name to Gary and Gerard who acquired it for $650,000. They thought it was a steal. Neither Gary nor Gerard was aware of how Jack came to acquire the unit. No questions were asked.

The last opportunity arose from speaking to his best friend Ronald who had made a significant profit in cryptocurrency last year. Peter is momentarily fascinated by Bitcoin and he invests $500,000 in it.  This was a very unfortunate foray into cryptocurrency. Peter’s computer was stolen from the house at Burwood by burglars and he had no way of tracing his bitcoin. He was so embarrassed that he just did not mention it to anyone because he thought it was a good idea one afternoon to make an investment that his friend recommended.  He didn’t think of converting the asset to cash. For this investment, $250,000 was taken from trust money proceeds of rent and other forms of income Peter received. Peter took the other $250,000 from his own private savings funds – money which he had saved for over 15 years.


Imagine that you are a solicitor and you have been instructed by a senior lawyer to prepare a brief to counsel.  Assume that the counsel is young and inexperienced in private law remedies. Your instructions and observations for the brief are more detailed than usual and include considerations and assistance along with full case citations. Read the facts carefully and write precisely.

Consider Peter’s breaches and advise accordingly in the light of the following:

The beneficiaries of the trust are angered upon discovering Peter’s investments and actions. The beneficiaries seek your advice as to what remedies, if any, they may have against Peter and/or any third party.

Advise Peter of any defences which he may have in relation to any action by the beneficiaries.

Advise the surviving members of the partnership as to what remedies they may seek, if any, against Peter.

Advise Mary as to her remedies as against Peter, if any, as she is now incapacitated and having recently split acrimoniously from Peter. Mary has no source of income apart from a pension and modest savings. Mary recalls that in 1985 she was required to spend $60,000 on a new kitchen complex and appliances for the house.  At the time, Peter said he couldn’t afford any renovations.  She feels like she has been under appreciated because she stayed home and performed home duties with the children for decades. Mary recalls that 30 years ago, Peter said to her that he would always look after her and what was his was hers.

(Note: There is no need to refer to the remedies pursuant to either the Property (Relationships) or Family Law Acts on these facts.)

Mark:      /35

Word limit: 2500 words

AGLC Referencing is required

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